Which type of insurance is often required if a borrower has less than 20% equity?

Private mortgage insurance (PMI) is typically required by lenders when a borrower has less than 20% equity in their home. This insurance protects the lender in the event that the borrower defaults on their mortgage, as a lower equity position signifies a higher risk for the lender. By mandating PMI, lenders can mitigate potential losses from foreclosure.

Homeowner’s insurance, while essential for protecting the property itself, does not address the lender's risk associated with low equity. Title insurance protects against potential claims related to the property’s title but does not serve to reduce the lender's risk in a high-loan-to-value scenario. Disability insurance provides income protection in case of an inability to work due to illness or injury, which is unrelated to mortgage equity requirements. Thus, PMI is the only option that directly relates to the requirement of having less than 20% equity in the property.